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TRADING POST Big plans for a brand-new, steel-trading behemoth

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The creation of Coutinho & Ferrostaal GmbH & Co. KG, the new global steel trading giant, has not prompted the combined company to make significant staff cutbacks.

"Often, when you have a consolidation of similar companies, that's one of the benefits you seek. But it's not an objective here," said Uwe T. Schmidt, co-chairman and chief executive officer of the company that has brought together the trading businesses of MAN Ferrostaal AG, Coutinho Caro & Co. International Trading GmbH and Grupo Villacero SA de CV. "We are going to use the existing labor source and promote additional business with the same staff," expanding its markets, products and service offerings.

The new organization, which has more than 340 employees and is expected to have sales this year exceeding $3 billion while handling just over 5 million tonnes, is viewed as one of the world's two largest independent, or non-mill-related, steel trading organizations. Stemcor Holdings Ltd., London, is the other.

Severe rationalizations aren't uncommon after the combinations of major players in any business, and some people looked for this to occur at the new Coutinho & Ferrostaal, which is based in Hamburg, Germany, and has major operating offices in Essen, Germany, and in Houston. But Schmidt said the duplication that normally might have resulted after putting together the predecessor organizations wasn't found. "We were most surprised that the combined companies have almost no overlap with respect to customer base and minimal overlap with respect to supply sources."

Moreover, Schmidt added, where there is overlap, the two formerly separate organizations each "addressed different customers and markets." For example, they each were significant buyers from Malaysia's Megasteel Sdn Bhd but addressed "completely different markets." Ferrostaal sold Megasteel product predominantly on the U.S. West Coast and on the European continent, while Coutinho's customers for Megasteel material were mainly in Britain and Spain. The new company already has made one key appointment. Enrique Gasca, who was president and chief executive officer of the Villacero Commercial International subsidiary of Grupo Villacero in Houston, has been named president and chief executive officer of the new company's North American operations, Coutinho & Ferrostaal Inc.

Ferrostaal's combination with Coutinho Caro and Villacero came after an effort to find a partner that was perceived by some outsiders as moving Ferrostaal more toward logistics or supply chain management and away from classic trading, and some of those same outsiders wonder today if that logistics goal has been abandoned now that Ferrostaal has teamed up with another trader. However, Schmidt said the new company will perform not only traditional buy-and-sell trading but pursue such value-added services as structured trade and structured trade finance, closed-end consignment stock arrangements and supply chain management. He stressed that since consolidation in both the steelmaking and steel consuming industries is likely to continue, the trading business must evolve along with these trends. "The goal has always been not to abandon the traditional trading business, but to supplement it," he said

In addition to his role at the new Coutinho & Ferrostaal KG, Schmidt remains president of MAN Ferrostaal Inc., the North American holding company for Germany's MAN AG, where his duties include not only representing MAN's interest in the new steel partnership but also its automotive services business, its government business—which includes supplying parts and components to the U.S. defense sector—and its alternative energy plant and equipment activities in such fields as biodiesel, solar power and wind technology.

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